Yesterday’s presentation by Donald Trump's economic adviser, Peter Navarro, at the Tax Policy Center’s discussion of the presidential candidate tax plans reminded me of a passage in George Orwell’s dystopic novel 1984. The inner party’s chief torturer holds up his left hand with the thumb hidden and four fingers extended and asks the prisoner, “How many fingers am I holding up, Winston?” When Winston replies “four”, the official responds, “And if the party says it is not four but five – then how many?”

That’s a bit of what’s happening with Navarro’s explanation of Trump’s tax and trade policy. His argument goes something like this: Yes, Trump’s tax plan on its own would increase the deficit. But in tandem with his trade policy (as well as regulatory changes and a pro-carbon energy policy), their tax plan would not increase the deficit.

Here’s where Navarro’s argument about trade goes wrong: If the US government cuts taxes, the budget deficit gets bigger and more foreign capital must flow in to help finance the larger deficit. Increased domestic investment will also draw more foreign capital. How do other countries earn those dollars? By exporting more to the United States (or importing less). Any macroeconomist will tell you that when the budget deficit and private borrowing both rise, so does the trade deficit. The rule: Sources of sales by U.S. businesses must equal uses of those sale proceeds by US households.